Newsom's first budget calls for big spending and paying down debt

01/11/2019

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His $209 billion proposal, which now goes to the Legislature, left little doubt that California, already one of the more liberal states, was taking a turn to the left and moving beyond the fiscal restraint of his predecessor, Jerry Brown. Newsom's first budget calls for big spending and paying down debt

SACRAMENTO, Calif. — Gov. Gavin Newsom proposed a blizzard of new spending in his first budget, calling for increased expenditures on education, homelessness and poverty, as well as programs to bolster California’s long-term fiscal health.

His $209 billion proposal, which now goes to the Legislature, left little doubt that California, already one of the more liberal states, was taking a turn to the left and moving beyond the fiscal restraint of his predecessor, Jerry Brown. Newsom’s new spending plans take advantage of a growing surplus he projects for the state.

The governor laid out his plans Thursday, his fourth day on the job, in a two-hour presentation, reading from notes scribbled on a legal pad and fielding often detailed questions.

At one point, apparently speaking extemporaneously as he walked across a stage, Newsom offered state financial assistance for workers furloughed in the partial shutdown of the federal government — a huge community of workers in this state. “Any of those federal employees who are furloughed, come in and we’ll get you unemployment insurance,” he said.

In response to a question, Newsom said he did not have a figure for what that assistance might cost the state.

He also said that his budget called for spending $305 million to clear dry brush in heavily wooded areas, as part of an accelerated effort to deal with the state’s scourge of wildfire. Newsom first announced that plan Monday. The following day, President Donald Trump sharply criticized California’s fire prevention efforts in a Twitter message, saying he would order federal officials to cut off emergency aid to the state.

The stylistic and policy contrasts with Brown were notable, and at times Newsom seemed to encourage comparisons. For example, he suggested that he had been much more open to negotiating with the Legislature during the budget preparation process than Brown had been — an assertion that was not disputed by lawmakers.

At another point, Newsom said that unlike his predecessor, he would move at some point to try to rewrite the state’s notoriously volatile tax system.

“I am not naive,” he said. “Gov. Brown had no interest in this, even at the peak of his power.”

Democrats and advocacy groups that had been frustrated under Brown, despite the party’s total dominance of state politics, expressed enthusiasm for Newsom’s budget.

“Senate Democrats are encouraged to see thoughtful, progressive initiatives in Governor Newsom’s proposed budget that can make a difference in the lives of Californians,” said Toni Atkins, a Democrat and the leader of the state Senate.

Republicans expressed concern at the pace of Newsom’s proposed spending but praised him for looking to pay down the state’s debt.

“While California’s fiscal picture this year is strong, the longer-term economic outlook is less certain,” said Marie Waldron, the Republican leader in the Assembly. “Our state liabilities are substantial, so we must avoid overcommitting the state with programs that will be threatened when our economy slows.”

Newsom said the state anticipated a $21.5 billion surplus, or about $6 billion more than legislative analysts had projected in November. He said that was largely because of a drop in claims from Medi-Cal, the state’s health care program for the poor.

The governor appeared to be walking a line between aggressively advocating new spending and showing sensitivity to California’s history of financial gyrations. He emphasized that he would use $13.5 billion of the surplus to retire debt and increase the state’s reserve fund. And he said that the vast majority of his new spending would be for one-time costs like building classrooms, rather than for new recurring expenses, like hiring additional day care workers.

“We are preparing for uncertain times,” Newsom said. “And we are paying down the debt in historic ways, and we are paying down unfunded liabilities in a way we never have.”

Still, the new governor clearly did not share the deep economic worries expressed by Brown and others, who have argued that the state is overdue for a recession.

“We are assuming that we are going to continue economic expansion,” Newsom said. “I know that sends shivers up some people’s spines, because I know we are 10 years into the recovery. Let me get this out of the way: None of us are naive. The governor said the next governor is going to be standing on a cliff. That may be true.”

From the day he took office, Newsom’s aides have made clear that he was intent on spending money to address the deep problems of income inequality in California. By any measure, his budget seemed intended to take Brown’s foot off the brake, in ways big and small.

It calls for increased spending on early child education, paid parental leave, college scholarships, workforce training and housing. It would expand Medi-Cal to cover more people in the country without authorization.

Newsom wants $3 million a year for research into Alzheimer’s disease, and $576 million to expand special education offerings in public schools. He would double a tax credit for working families and pay for literacy training for 26,000 inmates in state prisons.

Noting that 5 percent of the state’s children live in deep poverty, Newsom called for more money for CalWORKs, a public assistance program for families that has drawn criticism.

“At a time when people seem to be backing away, we are going to lean in,” he said. “I’m sick of the scapegoating on this damn program. I’ll defend it.”